I might be OK with the govt going (further) into the annuity business. Turn over some of your personal stash, and they pay you X% for life. Pretty simple to admin, they have more buffer than a private company, so it should be safer, and no profits to draw down payments. It should be pay-as-you-go (over the long term); if they project running out, they might need to offer less going forward to new contracts, or maybe even a very slight trim to existing contracts (predefined limits).
I see the possible advantages in this, as it might get people to take more responsibility for/contribute more toward their retirement by establishing a more tangible and guaranteed link between what they put in every month and what they can expect to get out.
But, there are downsides, too.
- To the degree that some of this money would have gone into investments anyway, then you've got the government competing with the private sector for capital. That drives up the cost of borrowing for businesses, which is not good for productivity.
- It won't be free of political ties. As the pool of investors grows, they'll have a vested interest in increasing the rate of return, and all of them have congressmen. So, we'll have the same "avoid short term pain by kicking the problem down the road" issues that have gotten us in trouble with SS.
- What will the money be invested in? I'd like to keep Uncle Sam from intruding further into boardrooms, so hopefully the $$ won't go into stocks. Investing it in more government debt just encourages more irresponsible spending at a time when bond buyers will likely (finally) be asking for more return for the risk they are taking with US bonds, thus reigning in the borrowing machine.
- Means-tested returns? Who knows. If things continue on the present path, there would be a fair possibility that the public would demand that the needy recipients of these annuity payouts should get higher "living wage" returns than the fat-cat wealthy recipients. Unlikely? That's where SS is headed.
Again, not an idea to reject out of hand, esp if it gets more people to save for retirement and thereby decreases the pressure to provide more taxpayer support for the elderly indigent. But we should look at all likely impacts. At first blush, I'd rather keep the annuity biz private and not increase the government's role in insulating people from the risks of the real world.